India’s Belated, Yet Insufficient, Realization

On the 8th of November, the Eleventh Five Year Plan was given and approved by the full meeting of the Indian Planning Commission, presided over by Prime Minister Dr. Manmohan Singh, its ex-officio chairman. This document, now onwards, is supposed to guide the shape and direction of economic development in the country.

In December 2006, a document: Towards Faster and More Inclusive Growth: An Approach to the 11th Five Year Plan (2007-2012) was published so that a nationwide debate could take place on the direction and main goals of economic development during the coming five years. It appears that, unlike the plan documents during 1950-1990, there was hardly any public discussion witnessed in the country, not to speak of any heated debate. No political party or group cared to put it on its agenda for serious consideration. Reasons for this indifference were obvious. With the onset of the era of globalization, based on the Washington Consensus, the role of the state in the economy and economic development began shrinking fast. Its regulatory powers became fewer and fewer. Market forces grabbed most of the area of decision-making, till then within the exclusive purview of the state.

The process of integrating India with the world market and dismantling the policy framework, created during the Nehru-era, began at a rapid pace during the Narasimha Rao regime whose finance minister Dr. Manmohan Singh was the main initiator and guiding star of the reforms, based on the 10-points of the Washington Consensus. The middle class and the corporate sector, besides the sponsors of the Washington Consensus, hailed him. Though the rate of economic growth increased and a neo-middle class emerged, the consequences for lower classes were not happy at all. This became evident in mid-1990s when the Congress lost badly at the hustings and went out of power and lost its dominant position for almost a decade. Its the then finance minister, Dr. Manmohan Singh, who was hailed as the darling by the neo-middle class and the corporate world lost miserably from South Delhi, a predominantly English educated neo-middle class constituency. The Congress went into oblivion till Mrs. Sonia Gandhi resurrected it in the new millennium. It was realized by Mrs. Gandhi and her party that there was no chance of wining power without securing the confidence and trust of the people. Hence a new slogan “Congress ka Hath, Aam Adami ke Sath” (Congress’s election symbol ‘hand’ always with the common people). The BJP-led NDA was rejected even though it spent huge amounts of money on showing that “India was shining” and by India it meant newly emerging middle class.

After the general election, the Congress came to head a coalition of secular and Left parties, called UPA (United Progressive Alliance) and its chairperson Mrs. Sonia Gandhi nominated Dr. Manmohan Singh to head the coalition government mainly because of his clean personal image. Both the key economic ministries and the Planning Commission, unmindful of the complexion of the mandate, came to be headed by persons, committed to the ten-points of the Washington Consensus. In spite of the formulation of National Common Minimum Programme and verbal reiteration of the commitment to the people at large, the government continued merrily with policies informed by the Washington Consensus and soon the results of legislative assembly elections in Punjab, U.P., Uttarakhand, Karnataka and Bihar gave it a rude shock and it became obvious that it was the warning signal and if no heed was paid to it, common people might throw it out next time. It was this realization that led to the formulation of National Rural Employment Guarantee scheme and the enactment of Right to Information law despite stiff opposition from bureaucracy and the votaries of the Washington Consensus.

The Approach document of the 11th Plan too came to declare that it was committed to poverty reduction and bridging the various divides that continued to fragment the Indian society. Along with raising the economic growth rate to 10 per cent per annum, the creation of productive employment opportunities at a faster pace, lifting the rate of growth of agriculture to 4 per cent per annum, and reduction of disparities across regions and communities were underlined as main goals.

Glancing through the opening remarks by Dr. Manmohan Singh at the full meeting of the Planning Commission, the government appears to be coming to senses and becoming aware of the likely disastrous political consequences of following blindly the dictates of the Washington Consensus. Seemingly, it has relegated the “trickle-down” strategy whose one of the greatest votaries, Dr. Montek Singh Ahluwalia, heads the Planning Commission, to the background. Talking of the new initiatives focusing on agriculture, rural development, infrastructure and the social sectors, the Prime Minister holds: “They are all, in many ways, steps towards our larger goal of rapid and inclusive growth. The Eleventh Plan has given us a chance to weave of all these individual sectoral initiatives into a coherent whole, focusing on rapid economic growth reaching out to every nook and corner of our vast country.”

Incidentally, it needs to be noted that this approach and the term ‘inclusive growth’ have come in the parlance of our Planning Commission from the World Bank, an important sponsor of the Washington Consensus. Its Report No. 34580-IN, entitled “India, Inclusive Growth and Service Delivery: Building on India’s Success. Developmental Policy Review” was issued on May 29, 2006. One may compare the Approach paper and the final document of the 11th Plan to discern the imprint of the World Bank thinking. Even many of the phrases are the same.

Obviously present political conditions and the changed thinking of the World Bank are behind seemingly the new approach of the government as reflected in the Plan document. It must not be forgotten that during the freedom struggle and, after Independence, the Nehru-Indira Gandhi governments repeated times without number that one of the national goals was to work towards eradicating inequalities in the society and lessening regional imbalances inherited from the British rule so that social fraternity and national unity were strengthened. The Washington Consensus relegated these twin aims to the background and this led to increasing social unrest reflected in the appearance of regional and caste-based parties with no national and international outlook, various forms of Maoist movements, caste-conflicts and proliferation of criminal activities. The growing regional imbalances were reflected in migration of workers from backward regions to prosperous regions in search of job opportunities, leading to resentment among local people. Regional imbalances have grown since the 1990s because new investments, both Indian and foreign, have gone largely to developed regions. Moreover, the well-to-do sections of the society have cornered the new job opportunities because they demand modern education and skills that they alone can afford them. The Prime Minister appears to be aware of the impending dangers to social unity and national integration when he says: “Of course, the growth cannot be restricted to isolated pockets or to certain sections of society. We need to be far more broad-based. The Plan, therefore, rightly emphasizes a strategy of inclusive growth.”

He goes on to add: “There are legitimate concerns on inclusiveness. The Plan does bring out the fact that the reduction in poverty and quality of employment created up to 2004-05 is inadequate. We do not have data on what happened in employment and poverty beyond 2004-05. We do not really know whether our government has done better and there is reason to hope that initiatives such as the NREGA [National Rural Employment Guarantee Act], Bharat Nirman, Sarva Siksha Abhiyan, Midday Meal and National Rural Health Mission may have improved the situation. Nevertheless there is no room for complacency on this issue. The numbers remain too large and poverty line is over 30 years old. I am glad that the Planning Commission has set up an expert group to review this matter. It must complete its work fast.”

The 11th Plan aims at increasing substantially the financial allocations to agriculture, irrigation, rural development, health and education. A large number of model schools, 30 new central universities and 370 new colleges in educationally backward districts are to be established and a substantial increase in the number of IITs and IIMs is to take place by 2012.

A perusal of the Plan document reveals that, in spite of all the verbal commitments to eradicate social inequalities and regional imbalances, there is no concrete and trustworthy scheme to this effect. So long as market forces have primacy, social inequalities and regional imbalances are bound to increase. The government continues to be firm on privatization of public sector enterprises and its resolve not to set up new ones. In this situation it is not clear how backward areas will be industrialised and the attitude of the private sector changed towards implementing any schemes of job reservation for socially and economically backward segments. Moreover, while the Prime Minister has lamented the increasing subsidies on food, fertilizers and petroleum products and have held them responsible for “fewer schools, fewer hospitals, fewer scholarships and slower public investment in agriculture and power infrastructure,” it is really intriguing that he has not referred to various kinds of undeclared subsidies and financial and fiscal concessions granted to the corporate sector. Public sector banks are saddled with a huge burden of non-performing assets because the corporate sector has not cared to repay its borrowings with interest and the government has been fighting shy of recovering them. When the UPA government was formed, Prem Gupta, Minister for Company Affairs, had announced from the housetop that he would bring to books the tycoons who had set up companies, floated shares, collected subscriptions and then disappeared. With the passage of years, he has completely forgotten to honour this commitment.

To conclude, there is some belated, but inadequate, realization of the realities. There appears to be an absence of courage to give primacy openly to national interests over the Washington Consensus. This is one of the reasons why the mass base of the Congress is not growing. You may bring about a hundred and one changes to tone up the organization, yet, you cannot bring back the masses behind you so long you fail to orient yourself to the requirements of the domestic situation.